After initially moving lower, treasuries showed a strong move to the upside over the course of the trading session on Tuesday.

Bond prices climbed more firmly into positive territory in afternoon trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.8 basis points to 2.605 percent.

With the drop on the day, the ten-year yield more than offset yesterday's uptick, falling to its lowest closing level in well over two months.

The early turnaround by treasuries came following the release of tame inflation data, which suggests the Federal Reserve will continue to refrain from raising interest rates in the near future.

After reporting no change in consumer prices over the past few months, the Labor Department released a report showing a modest increase in consumer prices in the month of February.

The Labor Department said its consumer price index rose by 0.2 percent in February after coming in unchanged for three straight months. The uptick in consumer prices matched economist estimates.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent in February after rising by 0.2 percent in January. Economists had expected another 0.2 percent increase in prices.

The report also said the annual rate of consume price growth slowed to 1.5 percent in February from 1.6 percent in November, while the annual rate of core consumer price growth edged down to 2.1 percent from 2.2 percent.

With consumer price growth slowing, Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The Fed would appear to be justified in supporting the real economy by being patient and leaving interest rates on hold for a potentially extended period."

Treasuries saw further upside following the release of the results of the Treasury Department's auction of $24 billion worth of ten-year notes, which attracted above average demand.

The ten-year note auction drew a high yield of 2.615 percent and a bid-to-cover ratio of 2.59, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.51.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The Treasury is due to finish off this week's long-term securities auctions with the sale of $16 billion worth of thirty-year bonds on Wednesday.

A batch of U.S. economic data may also attract attention on Wednesday, with traders likely to keep an eye on reports on durable goods orders, producer prices, and construction spending.